Monday, November 01, 2010

Below is my attempt to create an animation that depicts a back and forth discussion between two people with two very different perspectives on sustainable food production. I have to compliment xtranormal.com for making this possible. If you can type, you can make movies.

Thursday, September 09, 2010

I was having a conversation with someone recently about Sara Lee replacing their High Fructose Corn Syrup ingredient with ‘High Fructose’ table/cane/beet sugar, and they coined the phrase “ose” gate. I thought that summed it up well.

So what is the “ose” gate scandal/conspiracy? It is a combination of things. Several scams if you will. First it is the ‘sugar switcheroo’. Unfortunately, many people confuse the compound fructose with high fructose corn syrup (HFCS). Even worse, because it is “high fructose” corn syrup, they think that it is a sweetener that is really high in fructose compared to others. The undeniable truth is the fructose levels in HFCS are about 50%. But when you look at any other type of sugar, it is also 50% fructose. So, if fructose is bad, then HFCS and regular sugar are equally bad. It is all in a name. If we are comparing sweeteners based on fructose content, we could just as easily call table sugar “High Fructose” table sugar- let’s start calling it what it is ‘HFTS.’ The scandalous part is that food marketers are catering to this ignorance by advertising that they have removed HFCS from their foods and switched it with sugar. It makes no difference in terms of fructose content or calories, and consumers are being duped by the old ‘switcheroo.’

So, if it makes no difference in fructose content, or calories, then it likely will make no difference on obesity rates, yet that is the next scam. The ‘big fat lies’ scam. Opponents, (or conspiracy theorists) often like to claim that the massive use of HFCS is leading to obesity, but advocating that we replace it with HFTS (my new acronym). It makes no sense, but anti-agricultural activists and politicians are making hay with it. The argument that sugar sweetened beverages are related to obesity is shaky at best anyway. (1) Besides that, according to USDA data, the most abundant sweeteners in American's diets is not HFCS but HFTS (2) (both are about equal but HFTS as aways had the lead)
Then there are the attacks on farm programs, which sometimes comes from both democrats and republicans. Those on the left don’t like the idea of subsidizing politically incorrect farming practices (more on this later) and some from the right like to point out unintended consequences of government policies. The misconception is that subsidies lead to more corn production and cheaper HFCS and then cheaper high calorie foods- that lead to obesity. (I’ve already addressed obesity). Research from UC Davis blows this myth out of the water. If we get rid of all corn subsidies the impact on corn production would not be large enough to have a major impact on retail prices or consumption (they estimated the impact on would decrease consumption by at most .2%) (3) Subsidies , which amount to less than ½ of 1% of our federal budget become a scape goat for all of our problems.
Next, there is the dilemma of the Omnivore’s Dilemma:

“If you eat industrially, you are made of corn. It holds together your McNuggets, it sweetens your soda pop, it fattens your meat, it is everywhere. It is fed to us in many forms, because it is cheap- a dollar buys you 875 calories in soda pop but only 170 in fruit juice. A McDonalds meal was analyzed as almost entirely corn."-Michael Pollan Omnivore's Dilemma (4)

This is bad how? The fact that modern family farmers are able to feed the world in so many different ways and do it cheaply should be considered a miracle. Although not his intention, the quote from Pollan is actually a statement of accomplishment for farm families everywhere!

Finally, there is the myth that HFCS is the product of industrial agriculture and industrial farms, which are unsustainable and are having a negative impact on our environment. These beliefs have made modern family farming practices politically incorrect, or socially irresponsible in the minds of many consumers and politicians. According to USDA data, 98% of all farms in the U.S. are family farms and they account for 85% of all production.(5) Large family farms are more diversified (5) and benefit the community according to recent research at Iowa State(6) In terms of sustainability, the technology used on modern family farms has led to drastic reductions in greenhouse gases, decreased soil erosion, decreased groundwater pollution, improved water use efficiency, and has increased wildlife diversity and food safety. (7)

So, to review I have outlined the 5 ‘sweet’ scams that define the "ose"gate conspiracy:
1) The Sugar Switcheroo Scam
2) Big Fat Lies Scam
3) The Subsidy Scape Goat Scam
4) The Dilemma of the Omnivore’s Dilemma
5) The Political Correctness Scam

What can you do? You can support your local family corn farmer by having a coke (or beverage of your choice) sweetened with HFCS. Maybe get that with a supersized value meal at McDonalds.

Monday, July 19, 2010

A wealthy class results from satisfying the needs of others, making the middle class lifestyle (homes, cars, technology) possible. Living the middle class lifestyle also (by creating a market for all the things that go into being middle class) sustains the wealthy, in addition to providing opportunities for the poorest members of society to Improve their lot (job opportunities + technologies and conveniences that make poverty less grinding). Economic growth perpetuates this system, which is really like a self sustainable ecological system, with stabilizing feedback mechanisms (prices, profit, loss, interest rates). These natural checks kick in when someone gets too 'greedy', takes excessive risks, or imposes excessive costs on others or squanders resources inappropriately. The price system ensures a 'spontaneous order' in which our individual choices are made compatible in a world of scarce and finite resources and infinite preferences,cultures, and interests.

The Role of Government and Politics

Government has a role in this 'spontaneous' order, primarily to enforce property rights and prevent fraud and force. There is little power or glory for politicians, other than a reputation for fair enforcement of the law and restraint of using government to grant favors or confiscate wealth.

If a clever politician can fabricate flaws in the order, and convince people that if we give them special powers and privileges to fix the problems, they have much to gain. Clever business owners and special interests also may fabricate flaws that can only be fixed by givingsome politician the power to make rulings that disproportionately benefit their business.

These fabrications may often be described in terms of leakages from the system, cases where prices, profits, or interest rates don't keep our interests in check. Admitting that every choice will have some side effect not totally captured in the price of a good, (referred to as an externality by economists)many of these problems can be handled within the system by an appropriate assignment and enforcement of property rights, torts, or contract law. Often times technological change and economic growth will take care of many of these issues. Unfortunately these solutions have little glamor for ambitious politicians. They are often able to convince others to give them the power to take a more dramatic approach, which involves a role for government to control or influence choices and resources.

The Political Order

No longer are choices guided by prices based on tradeoffs which reflect the knowledge and preferences of free people, but now they are heavily influenced by the narrow preferences of some self interested politician, business, special interest, or politically manipulated majority block of voters.

Suddenly the natural checks and balances of the 'spontaneous order' are upset, and our many choices become incompatible. We get shortages, surpluses, booms, and busts. We face the wrath that comes within a world unequipped to deal with the problems of scarce resources in the face of infinite preferences, personalities, cultures, and needs.(often referred to as the 'calculation problem' by economists)

To deal with these problems it may seem that the obvious solution is to expand the role of government and minimize the role of individual interactions. This leaves little opportunity for the harmonizing forces of a 'spontaneous order' to work. The politician with the most dramatic fabrication and solution with the greatest populist appeal will get elected. A new strongly entrenched political order unfolds with few checks and balances but strong self perpetuating political feedback mechanisms. The elites and most well connected businesses will prosper.

Conclusion

The spontaneous order created by free individuals appeals to cooperation for meeting the needs of society peacefully. The political order creates masters and servants and appeals to the use of force, either directly or vicariously through some agent of the state.

Thursday, July 15, 2010

“Farmer Jim Kreutz uses derivatives to soften the blow should the price of feed corn drop before harvest. His brother-in-law, feedlot owner Jon Reeson, turns to them to hedge the price of his steer. The local farmers' co-op uses derivatives to finance fixed-price diesel for truckers who carry cattle to slaughter.… The question for these farmers is whether such rules will make hedging more expensive. Some say new requirements on big players will create higher costs for small players, including the cash dealers will have to put aside to enter into private derivatives transactions. Some brokers think restrictions on big-money banks and investors will drain the amount of money available to the everyday deals farmers favor… Mr. Gengenbach estimates that one quarter of his farm clients use derivatives."LINK

One thing is, the financial reform bill does little to address the causes of the financial crisis (see the Posner and Becker blog for Five Major Defects of the Financial Reform Bill- LINK) and as the above points out, could have a negative impact on farms.Some bloggers and others have already attacked the Wall Street Journal article as being hack journalism, for example see:

'The paper wants you to get the impression that yeoman farmers are getting crushed under the wheel of the new bill. Or that they are afraid they will.' (link)

USDA research indicates that across the board as many as 25% of farmers utilize futures markets or hedges to manage their risk. The report indicated that it’s not just the wealthiest farmers using these tools either. Data presented in that report indicated that in 1996 almost 20% of farmers earning below $50,000 utilized futures hedges. That's not everyone, but we are still talking about thousands of farms. Now not all of these are using products that may directly be affected by the legislation, but as the Journal points out, there are concerns that 'restrictions on big-money banks and investors' could reduce capital and increase the costs of the products that every day farmers use. (or at least the 25% that currently may be utilizing these risk management tools). Besides the Wall Street Journal, as reported on AgWeb.com, agricultural economist Scot Irwin explains the number of ways that this legislation could impact farmers that don’t directly use the kind of products specifically addressed by this legislation. Again, as many politicians and journalists ( like those critical of the WSJ article) fall prey to the fallacy of concentrating only on what is seen (vs. unseen) Irwin points out the “law of unintended consequences may make it much more likely that a commercial enterprise will get caught up in these limits."

Some are critical that the Journal only pointed out 'potential worries' but never in fact talked to real farmers that had real concerns or (I guess they forgot about the farmer showcased in the article that hedges 70% of his crop). But the truth is, and the lesson we learned from the Great Depression is that it is worry and uncertainty that in fact prevent a market rebound and encourage prolonged stagnation as much as real direct impacts can.

"Businessmen came to ask themselves whether Roosevelt really understood a system where the hope of profit sparks expansion and investment. Or did he believe simply in centralizing decision and authority in boards and "planners" along the Patomac?"-John

ChamberlainChamberlain goes on to explain how many businesses during the great depression were developing the products that would fuel the economic growth we saw in the decades that followed. Only, during the depression, Roosevelt's reforms and policies created uncertainty that kept them from taking any action until after WWII.

"the magnitude of the response of U.S. business to the war is in itself refutation of the thesis that in the thirties businessmen simply sat on their hands..it simply would not have been able to produce the new type of goods when the war button was pressed"

The financial reform bill certainly has the potential to prolong the recession and have a negative impact on many sectors of the economy. As quoted in the AgWeb story:

“Scott Irwin, ag economist at the University of Illinois, says the impact on agriculture is a guessing game. Irwin, who has studied market players for many years, notes that the impacts on farmers and those with whom they do business will very much depend upon how the law is interpreted and enforced.”

And that is an awful truth. When it comes to comprehensive reforms like these, (over 2,000 pages) it isn’t what the bill says, it’s not what your elected representative says it means, it’s what some lawyer, bureaucrat, or judge interprets it to mean after it has passed. That isn’t the kind of government our founders intended, but it does create the uncertainty that is dragging out this recession. Great reporting by the WSJ and AgWeb.

References:

The Enterprising Americans:A Business History ofthe United StatesBY JOHN CHAMBERLAINFinance Overhaul Casts Long Shadow on the Plains. Wall Street Journal. Michael M. Phillips. July 13,2010.

Saturday, July 10, 2010

Does corporate greed put our lives at risk? Some believe so, and as this naïve college student in the 1970’s points out, (see video via YouTube) the Ford Pinto is a prime example. However, as Milton keenly corrects him, risk is just one more tradeoff that we make in our everyday lives. Sometimes it is between risk vs. convenience (an easier to use product that comes with more risk) or risk vs. value ( a riskier but more affordable product). Profit maximizing companies try to produce goods and services that match as closely as possible consumer preferences, including preferences related to risk. Now it is true that if a firm is grossly negligent, they should be liable. But as Friedman points out, producing a product that simply factors in consumer’s risk preferences is not the same thing as negligence.

In agriculture we see that many people voluntarily take risks that may seem absurd to others- for example consuming medium or rare ground beef, raw milk (where legal) , or even organic vegetables where it has been found that ‘the use of animal wastes for fertilization of produce plants increased the risk of E. coli contamination in and semi-organic produce significantly.’ (organic produce was found to make E.coli contamination 13 times more likely with a 95% confidence interval) It’s not just organic, but conventional non-GMO foods also have increased health risks. Foods made with GMO-free corn have been shown to have increased levels of fusarium infestation and higher levels of the toxin fumonisin.

Besides personal risks, there are also environmental risks related to food choices. When Kroger (and other retailers) decided to remove all milk containing Monsanto’s green technology rbST ( recombinant bovine somatotropin) they immediately increased their carbon footprint in their dairy supply chain, noting that the use of rbST in the dairy industry has resulted in the equivalent of removing ‘400,000 family cars from the road or planting 300 million trees.’ Biotech (GMO) crops in general have lead to reduced fossil fuel use, reduced carbon footprint, and reduced use of toxic chemicals. In general, the decision to buy GMO free or organic has attached with it, environmental risks.

Of course consumers should be given choices. At least with the Ford Pinto, to my knowledge, it was not marketed as the word’s safest and most environmentally friendly car. But, unlike the Pinto, many food products, especially non-GMO lines, are marketed as or at least give many the impression of having reduced personal and environmental risk. This could be misleading.

As Conko, Miller and Kersh point out:

‘Companies that insist upon farmers’ using production techniques that involve foreseeable harms to the environment and humans may be held legally accountable for that decision. If agricultural processors and food companies manage to avoid legal liability for their insistence on nonbiotech crops, they will be ‘guilty’ at least of externalizing their environmental costs onto the farmers, the environment and society at large.’

Sunday, July 04, 2010

Family farms like this aren't portrayed well in King Corn or Omnivore's Dilemma. Sustainable Family farms like in this video (some larger some smaller) account for 98% of all farms and 85% of all food production. Corporate/Factory/non-Family farms actually only account for 2% of all farms and only 15% of production in ...the US. Activists have cleverly been able to appear 'pro-family farm' and 'pro-sustainability' while actually undermining the tools and technologies that most family farms rely on to produce safe, affordable and sustainable food.

References:

Structure and Finances of U.S. Farms: Family Farm Report, 2007 Edition / EIB-24Economic Research Service/USDA

Thursday, June 10, 2010

“Lobbying records show that BP is no free-market crusader, but instead a close friend of big government whenever it serves the company’s bottom line.
While BP has resisted some government interventions, it has lobbied for tax hikes, greenhouse gas restraints, the stimulus bill, the Wall Street bailout, and subsidies for oil pipelines, solar panels, natural gas and biofuels. ..BP was a founding member of the U.S. Climate Action Partnership (USCAP), a lobby dedicated to passing a cap-and-trade bill.”

“The federal government has no business protecting BP from paying for the harm it has done to shrimp fisherman. The liability cap and the spill fund are subsidies for oil drilling. In a free market, oil companies would have to buy more insurance to cover the cost of a potential spill. In other words, a free market in oil drilling would mean no liability cap, no 8-cents-a-barrel tax, and no special fund whereby careful drillers pay for sloppy spillers.”

“Even before the current oil spill into the Gulf of Mexico it was well understood that drilling offshore sometimes results in spills. The current oil spill in the news has brought the idea of spills to the attention of many, many more people, people who don’t usually think too much about these things. But it isn’t obvious to me that the spill should cause us to revise our estimates of the likelihood of spills, or otherwise alter any of the factors that go into well reasoned policy analysis. And if all of the inputs going into a well-reasoned policy analysis stay the same, then the policy recommendation should stay the same too…. you should identify the new policy-relevant information upon which you base your call for changes. Or, in other words, you should specify what was wrong with your understanding of offshore oil development as of about two months ago, and then explain how correcting that mistake leads you to favor more restrictive regulations.”

“Advocates for the regulatory state are fond of complaining that things like the financial meltdown, the BP oil spill, and the like, are the result of an “unregulated marketplace.” But it was federal loan guarantees that first made securitized mortgages into a marketable asset. And I wouldn’t consider a $75 million cap on liability to be exactly “laissez-faire.”…What passed for federal regulations were ineffectual because, among other things, it’s not the federal government’s own money that’s at risk. Things get downright chummy between regulators and regulated. Inspectors sleeping with executives and snorting crystal meth off of toaster ovens is what you call a “public-private partnership,” I guess.”

“But if relations between regulators and regulated aren’t really all that adversarial, you know what is adversarial? Relations between insurers and the insured… Insurance companies take the kind of adversarial attitude toward the insured that liberals only wish government regulators took toward regulated industries.”

“Amid all the yammering by the anti-pesticide crowd and those who would return agriculture to the days of mules, manure, and muscle, there have, of late, been some rays of reason from unexpected sources — New Yorkers. The stakes are too high, the Times asserts, “for us not to make the best use of genetic engineering. If we fail to invest responsibly in agricultural research, if we continue to allow propaganda to trump science, then the potential for global agriculture to be productive, diverse, and sustainable will go unfulfilled.”

“Companies that insist upon farmers’ using production techniques that involve foreseeable harms to the environment and humans may be — we would argue, should be — legally accountable for that decision. If agricultural processors and food companies manage to avoid legal liability for their insistence on nonbiotech crops, they will be “guilty” at least of externalizing their environmental costs onto the farmers, the environment, and society at large.“

“Setting a precedent of rationality is all the more reason for the USDA to focus on the science as it makes a final decision on RRA. American jobs are at stake, as well as the ability for each of us to feed our families in this difficult economic time. Unscientific claims must not be allowed to justify rejecting a product that makes our food friendlier to the environment and the family budget.”

“ Activists especially want to import EU-style bans on genetically modified crops, pesticides and other technologies that are integral parts of many of today’s farming operations. And they are increasingly finding allies within Congress and the regulatory agencies who want to follow their lead. Only one real obstacle remains in their way—a vast body of sound science practices developed by independent scientists at the EPA and their advisors……….In this way, “inflammatory” accusations and “provocative conclusions without supporting data” may ultimately trump science-based regulatory policy as it has always been practiced in the United States and open the door up for a very different kind of regulation — one based on which activist group screams the loudest and is most effective at instilling unjustified fears in the name of “precaution.”

Tuesday, June 08, 2010

In a previous Agweb post I pointed out how new social media technology has allowed farmers and industry advocates to take a stand in great numbers against many short sighted views and elitist agendas.I’m not sure this would have been possible with traditional media.

The problem is many commentators only like to talk about having intellectual discussions about the issues they support (climate change, biotechnology, soda taxes, gun control, regulation, bailouts, stimulus) but they never actually want to engage in discussions about them. That way, they can always claim ownership of 'science' and 'intellect' but never show their cards revealing how empirically depraved their policies really are. The recent media coverage (more like libelous slander) and discussion about Rand Paul is a case in point.

In a recent TIME magazine article Thomas Woods illustrates the problem:

"It is true that there are certain things that libertarians believe that will seem just shocking and scandalous to most people unless we're given 10 minutes to explain ourselves, but that's about nine minutes more than anyone in modern politics gets.”

Instead of engaging Rand Paul in a discussion about constitutional principles and economic theory critics in the media preferred to limit the conversation to a proxy name calling session that left the public with impressions of extremism and racism. With traditional media, it is very difficult to get the whole story. We’ve seen this lot in agriculture with celebrity authors and novelty film makers in how they depict the industry.(like the recent articles in TIME magazine, movies like King Corn, and HBO specials on factory farms) But with the new liberated social media, lots of viewpoints can be shared and evidence can be vetted.This is likely reason so many Americans turn to alternative media for their news, as indicated by a Zogby poll back in 2008 that found:

(the) “Internet is the top source of news for nearly half of Americans; Survey finds two-thirds dissatisfied with the quality of journalism” and “67% View Traditional Journalism as “Out of Touch”

A genuinely educated electorate (thanks to alternative media) easily finds flaws in tired political tactics.As I mentioned in a past post, politicians are starting to be held accountable for making up their own facts to support things like soda taxes and climate change legislation. At first alternative media was embraced by many politicians, thinking that enlightened minds would translate into overwhelming support (and money) for their policies. Now politicians and commentators have realized that free speech and 'liberated minds' could make it difficult to force feed policy agendas to voters armed with information. One thing this has also shown is how robust and competitive the market for news and information has become with new technology. This undermines any logical support for free speech infringing ideas like imposing the 'fairness doctrine' on talk radio. In response we are starting to see lots of ideas proposed to get a handle on the mass use of alternative media in the exercise of free speech.

"The bureaucracy sees it as a problem that the Internet has introduced a wealth of information options to consumers, forcing media companies to adapt and experiment to meet changing market needs."

"In other words, government policy would encourage a tax on websites like the Drudge Report... Such a tax would hit other news aggregators, such as Digg, Fark and Reddit,"

"A 5 percent tax on consumer electronic devices such as iPads, Kindles and laptops ..Other taxes might be levied on the radio and television spectrum, advertising and cell phones."

Already, hidden taxes on data have been incorporated into past proposed federal budgets. An article from Reuters last year indicates that yearly fees for spectrum licenses are proposed to rise 1000% over the next decade.

With increased use of alternative media, falling poll numbers, and an electoral war being waged against incumbent candidates, alternative media has become America’s next great villain. Perhaps in the minds of the Cass Sunstein’s of the world it needs its own version of a sin tax to nudge us into viewing only government approved websites and blogs.

‘Congress shall make no law .. abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble.’Constitution of the United States

About Me

My primary interests are in applied econometrics with applications related to the interrelationships between genomics, nutrition, health, and the environment. I have a quantitative and analytical background in the areas of applied economics and statistical genetics. I leverage my training with experience in machine learning and predictive modeling using SAS, R, and Python to solve problems. I can understand complex research and discuss the application with a scientist, sales representative, or the customer whose problem ultimately drives the analysis. I can code my own estimators, execute SQL queries, parse text files, and visualize a social network.